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Do’s and Don’ts of Bank Borrowing

by Ed Martin

If you are considering getting a bank loan for your small business, especially one through the SBA, you should be aware that these loans come with some strong strings attached that add unexpected risks to business borrowing. For example, business loans are often secured by personal assets, meaning if you default on your business banks can come after your personal assets.

Author Paul Diamond takes a look at things to ponder when getting a bank loan and presents a good set of borrowing guidelines in his article, The Dos and Don’ts of Borrowing in Uncertain Times.

Highlights of this list are to:

Be careful with the guarantees you give for a loan

Don’t borrow more than you need

Don’t put your personal assets at risk

Follow the rules for your loan

Understand the terms and conditions before signing a loan

Plan wisely for using borrowed funds.

Business consultant Ed Freiermuth tells Diamond that small businesses can consider borrowing money, but given the current economic situation they should be very careful. The risks of another downturn in the economy are still great so businesses should only borrow when they can get an exceptional deal and have a real need for funds. Sounds like good advice.